SIR – I was surprised by your views about tax deductions on charitable giving (“Sweetened charity”, June 9th). The notion that governments are “subsidising” charities by exempting donations from tax is absurd. Taxes are levied by government to provide for social services. Charitable donations are voluntarily paid to provide for some areas of the social services, including in education, health care, poverty reduction, international aid and the arts, which often receive inadequate government support.

Your suggestion that charitable activities are less legitimate in so far as they do not “match very closely the spending choices of democratically elected governments” is bizarre. Of course they don't match. Charity fills the gaps left by governments and creates a decentralised and pluralistic system of social investment, which is a very good thing.

Finally your notion that philanthropy is a kind of self-centred consumption is nonsense. By definition charitable giving cannot materially benefit the donor; it is instead a unilateral gift to the community. Sure, there are some vanity projects funded through charity, such as naming business schools and some esoteric cultural projects, but self-serving or self-aggrandising (or just plain wasteful) government-sponsored projects are not that uncommon either.

John CooOttawa

SIR – Your discussion of charity and taxation will no doubt earn you condemnation from many quarters, but such a clear-headed assessment is long overdue. If all charitable organisations devoted most of their resources to doing good there might be less controversy. Unfortunately, that is not the case. Two disparate examples illustrate the reality.

The Mormon church is an immensely wealthy organisation, in large part because tithing is obligatory. The church has not released financial statements since 1959, but informed estimates indicate that tithing rakes in $4.3 billion a year. Its extensive business holdings bring in a similar amount. The church does do some useful charitable work such as aiding the victims of Hurricane Katrina and other disasters, but these account for a small part of its vast income. Earlier this year the church opened the swanky, multi-billion dollar City Creek Centre shopping precinct for luxury-goods stores in Salt Lake City.

Donations to university sports departments provide a quite different example. Here, the contributions are used to fund what was once described to me as “an ever-expanding arms race” to build larger stadiums and arenas, and to pay coaches' salaries that quite often exceed those of a university president. Donors get preferred access to football and basketball tickets. The abysmal graduation rates of football and basketball players suggests that these “charitable” donations do little to improve higher education.

Ole HolstiProfessor emeritus of international affairsDuke UniversityDurham, North Carolina

* SIR – I thoroughly enjoyed your article. We are a relatively small charity and are heavily reliant on our donors, philanthropic and otherwise, and as such my donors left me in no doubt about their intended behaviour changes should the government have pressed ahead with plans to cap tax relief on charitable donations.

The past 20 years have seen successive governments support the voluntary sector in a range of ways including sensible approaches to incentivising philanthropic investment but, as with every industry, more could be done to remove the regulatory burdens and restrictions placed on generating money for charities.

Not entirely different from this recent proposed hindrance to the generation of private charitable funds are the obstacles that charities, such as Missing People, face when raising money through charity lotteries. Currently, limits are imposed on how much money a licensed charity can raise through these lotteries. These limits are legislated through the Gambling Act.

From our perspective, it appears that the current restrictions placed on charity lotteries are born out of a fear that the creation of major lotteries would result in the cannibalisation of the National Lottery. Missing People is a beneficiary of the Big Lottery Fund and it has helped us to transform our work in supporting the families of missing people; we are keen supporters of the role of the National Lottery. Yet, comparable examples from international markets illustrate that charity and national lotteries can co-exist successfully.

Charity lotteries provide a fantastic source of support to thousands of voluntary sector organisations across Britain. Missing People alone has received £1.75m ($2.7m) in funding, money raised by players of the charity lottery, People's Postcode Lottery.

Unusually the People's Postcode Lottery provides sustainable unrestricted income, the holy grail of fund-raisers. It is our lifeblood and as such enables us to be a lifeline to the 250,000 people who run away or go missing every year. Therefore I cannot help but conclude that, in addition to continuing to support the endeavours of individual philanthropists, the organisational vehicles for philanthropy like charity lotteries should be given greater liberty, and help encourage even greater giving in this time of increased dependency on the voluntary sector.

Martin Houghton-BrownChief executive Missing PeopleLondon

Social mobility in China

SIR – I was happy to read your article about happiness in China (“Money can't buy me love”, June 16th). But I cannot agree with your implication that the Chinese tolerate inequality. We must be clear about what kind of inequality we are talking about. Inequality in itself is not necessarily unfair, unless it is related to social factors that are not easy to change and are in a society with low social mobility.

My paper “Identity, inequality and happiness”, published in World Development, finds that the income gap between migrants and local residents in urban areas reduces happiness overall. If we control for this, happiness increases. The most important policy that would make Chinese people happier is to remove the links between income and social identity, such as the household registration system (known as hukou).

Ming LuProfessor of economicsFudan UniversityShanghai

Co-operating with Honduras

SIR – Regarding your article about drug-trafficking and violence in Honduras, I would like to clarify that the United States has no military bases in the country (“Eye of the storm”, June 16th). We do have military personnel assigned to Joint Task Force Bravo, which is located at Honduras's Soto Cano air base. However, we are tenants there and do not own or control this base.

SOUTHCOM's security assistance to Honduras has included funding to help the government upgrade existing facilities at Puerto Castilla, Mocoron and El Aguacate. Honduran authorities can conduct counter-trafficking missions with American inter-agency assistance from these locations.

Robert AppinUS Southern CommandDoral, Florida

Hope for Nepal

SIR – I agree with Banyan's assessment of Nepal, that “playing politics the democratic way…is holding it together so far” (June 16th). But he did not mention the economic progress that has accompanied the constitutional convulsions and political posturing since the 2006 peace accord. GDP growth has averaged around 4.5% and soaring FDI inflows from India and China have grown by an average of 50% a year, with global inflows increasing at 27%.

The current Maoist prime minister, Baburam Bhattarai, has presided over legislation to protect private property and promote foreign investment. Of course, Nepal remains a poor country. We have launched Nepal's first international private-equity fund, which is designed to generate financial and much-needed social and environmental returns.

Tim GocherChairmanDolma Development FundLondon

Business quotes

SIR – You began an article with the old saw “that half of all advertising budgets are wasted—the trouble is, no one knows which half” (“Change of track”, June 9th). The remark is frequently attributed by Britons to Lord Leverhulme, founder of Lever Brothers, and by Americans to John Wanamaker, who opened Philadelphia's first department store. Though references to such a saying date from at least 1919, no authoritative reference has been found linking either man to it. This leads one to observe that at least half the attributions are false, the trouble is no one knows which half.

Professor Michael MainelliExecutive chairmanZ/Yen GroupLondon

Saints and Tory tensions

SIR – There is a certain irony to your depiction of George Osborne, Britain's chancellor, as St Sebastian (Bagehot, June 16th). Sebastian, an early saint and martyr during the Roman persecution of Christians by Diocletian, the emperor at the time, is popularly believed to have died after being shot full of arrows, as you depicted. Actually, he miraculously survived and was found and nursed back to health.

His actual martyrdom came later, while he was clubbed to death for verbally attacking Diocletian. Perhaps your illustrator is trying to tell us something.